Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 584

A significant shift in the jobs market

Job figures for September 2024 reveal that nearly all the additional hours worked over the past year have been in the non-market sector. Much of this has come from the ‘care economy’ - the fastest growing sector over the past decade, and the most common destination for workers switching industries. This has accelerated a long-standing trend in the Australian economy: its transition from goods production—particularly in agriculture and manufacturing—towards services - such as education, tourism, hospitality, and retail.

An ageing population that demands more healthcare, boosts to wages for aged care and child care workers, potential new investments in cheaper child care, and the continued growth of the National Disability Insurance Scheme (NDIS) underpin projections that this shift will continue.

These projections of an ever-growing care economy often do not consider how the economy’s supply-side adjusts to accommodate it. Looking at employment shifts between sectors over the decade to 2022 can help unpack this.

The shift towards the care economy is stark in these terms.

You can also see the clear trend away from employment in goods sectors. In fact, employment growth has been negative or small in most major goods industries – meaning they are falling as a share of the workforce. Many workers are leaving these sectors or retiring out of them. The one exception is construction, which has seen robust employment growth and stayed similar as a share of employment. Construction is an anomaly reflecting the high demand for homes and infrastructure running up against declining productivity, possibly in part due to zoning restrictions.

The care economy may look like a participant in the march towards a service-based economy. But the growth of the care economy differs from other service sectors in three key ways, with important economic implications.

First, while other service sectors have grown largely through new migrants and drawing workers from non-employment, the care economy has grown largely from workers switching in from work in other industries in the year prior. New research from e61 shows that over half of those switching into the care economy came from two major ‘churn industries’ – Accommodation & Food and Retail. Australians often use those industries as the first rung on the job ladder and the care economy has been capturing many of the subsequent steps.

Other significant contributors include Administration & Support, and Public Administration & Safety. This shift has caused market services' share of employment to decline for the first time in decades, dropping from 53% pre-pandemic to below 51% today.

Second, the care economy has seen almost no measured productivity growth over the past decade, while most other service industries have shown solid gains. Although productivity growth is difficult to measure in the care economy (and appears to be underestimated in healthcare), a significant expansion in labour—reliably measured—has been essential to drive the growth of the care economy.

By contrast, other service industries have generally grown through productivity growth alone. This is true both in service industries which use technology heavily (such as IT and professional services – with finance being an exception) and those which are more people-driven. Looking at the industries supplying care economy workers: over the past decade, retail labour productivity is up 13%, accommodation & food by 18%, and administrative services by 23%.

However, this trend doesn't hold in the care economy, or for that matter, its companion “non-market” industry, education and training, where output has increased only by adding more workers, given productivity has been stagnant. The longstanding fear that 'services will slow productivity growth' is not being realised. Service sectors are not a monolith. Some service sectors – particularly in the `non-market’ sector - are experiencing weak productivity growth, but not all.

Third, policymakers may have to reconceptualise what productivity growth looks like on the ground. Productivity growth in market services over the past decade can be easy to visualise. Self-checkouts and restaurant QR codes, though sometimes inconvenient, reflect investments in labour-saving technology. Online retail can also improve efficiency in warehousing and inventory management. These changes – potentially also a response to a tight labour market and competition for workers from the care economy, where relative wages have risen materially over the past decade – mean firms can grow output with less labour use.

In contrast, imagining labour-saving productivity improvements in childcare or aged care is more difficult. In these sectors, preserving quality may be more important. It’s difficult to imagine a "self-checkout" equivalent for aged care. Instead, productivity growth might come from improving service quality without increasing worker numbers, as the Productivity Commission found in healthcare, rather than cutting labour while maintaining the same quality.

The expansion of the care economy represents the most profound structural change since the mining boom. It also offers the chance to ensure high-quality care for the most vulnerable—something a prosperous country like Australia can and should achieve. However, this brings fresh challenges, particularly in terms of labour demands and the impact on productivity growth both within the sector, and beyond.

 

Matthew Maltman is a Research Economist at the e61 institute, and previously worked at the Australian Productivity Commission.

 

  •   30 October 2024
  • 1
  •      
  •   

RELATED ARTICLES

Why is Philip Lowe worried about productivity?

Jobs Summit keynote: the changing Australian economy

Are older Australians re-assessing the job market?

banner

Most viewed in recent weeks

The growing debt burden of retiring Australians

More Australians are retiring with larger mortgages and less super. This paper explores how unlocking housing wealth can help ease the nation’s growing retirement cashflow crunch.

Four best-ever charts for every adviser and investor

In any year since 1875, if you'd invested in the ASX, turned away and come back eight years later, your average return would be 120% with no negative periods. It's just one of the must-have stats that all investors should know.

LICs vs ETFs – which perform best?

With investor sentiment shifting and ETFs surging ahead, we pit Australia’s biggest LICs against their ETF rivals to see which delivers better returns over the short and long term. The results are revealing.

Family trusts: Are they still worth it?

Family trusts remain a core structure for wealth management, but rising ATO scrutiny and complex compliance raise questions about their ongoing value. Are the benefits still worth the administrative burden?

13 ways to save money on your tax - legally

Thoughtful tax planning is a cornerstone of successful investing. This highlights 13 legal ways that you can reduce tax, preserve capital, and enhance long-term wealth across super, property, and shares.

Our experts on Jim Chalmers' super tax backdown

Labor has caved to pressure on key parts of the Division 296 tax, though also added some important nuances. Here are six experts’ views on the changes and what they mean for you.        

Latest Updates

Investment strategies

Warren Buffett's final lesson

I’ve long seen Buffett as a flawed genius: a great investor though a man with shortcomings. With his final letter to Berkshire shareholders, I reflect on how my views of Buffett have changed and the legacy he leaves.

Property

The housing market is heading into choppy waters

With rates on hold and housing demand strong, lenders are pushing boundaries. As risky products return, borrowers should be cautious and not let clever marketing cloud their judgment.

Investment strategies

Dumb money triumphant

One sign of today's speculative market froth is that retail investors are winning, and winning big. It bears remarkable similarities to 1929 and 1999, and this story may not have a happy ending either.

Retirement

Can the sequence of investment returns ruin retirement?

Retirement outcomes aren’t just about average returns. The sequence of returns, good or bad, can dramatically shape how long super lasts. Understanding sequencing risk is key to managing longevity risk.

Strategy

How AI is changing search and what it means for Google

The use of generative AI in search is on the rise and has profound implications for search engines like Google, as well as for companies that rely on clicks to make sales.

Survey: Getting to know you, and your thoughts on Firstlinks

We’d love to get to know more about our readers, hear your thoughts on Firstlinks and see how we can make it better for you. Please complete this short survey, and have your say.

Investment strategies

A framework for understanding the AI investment boom

Technological leaps - from air travel to computing - has enriched society but squeezed margins. As AI accelerates, investors must separate progress from profitability to avoid repeating past mistakes.

Economy

The mystery behind modern spending choices

Today’s consumers are walking contradictions - craving simplicity in an age of abundance, privacy in a public world. These tensions tell a bigger story about what people truly value and why.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.